ECO202 Module 2

Fiscal Policy

Submit a 4- to 5-page paper that addresses the following questions. Be sure to use references within the paper to support your answers. Show work for all calculations.

1. Which has a larger effect on aggregate demand: an increase in government expenditure or an equal-sized decrease in taxes? Explain your answer.
2. To eliminate a recessionary gap, which fiscal policy should the government pursue? Be specific.
3. The online text discusses fiscal policy in action. Keynesian economics is a school of thought that believes the fiscal policy is needed to stabilize the fluctuations in the real GDP. Classical economists such as Adam Smith believe that the economy is most efficient without government intervention. Suppose you are an advisor to a presidential candidate. Which school of thought would shape your economic plan and why? Be sure to use references to support your answer.
4. The majority of lobbying efforts center on fiscal policy. Please discuss your opinions on lobbying regarding whether it is useful and should continue as is, it should continue but with constraints to limit how much is done, or it should be eliminated.